In the past few years, the housing inventory saw some of its biggest shortages, shaping the entire housing market across the US. But is it recovering in 2022?

Table of Contents

  1. The State of the Housing Inventory in Recent Years
  2. The State of the Housing Inventory in 2022
  3. Tips for Real Estate Investors
  4. Top 10 Cities With a Healthy Housing Inventory in 2022
  5. Bottom Line: Will Housing Inventory Increase in 2022?

In recent years, especially since the COVID-19 outbreak, the housing inventory struggled to keep up with the increased demand. It was the main thing that shaped the housing market years, and its effects are still being felt across the US housing market today.

So, let’s talk about the state of the housing inventory in recent years and compare it to today’s market to see whether inventory is recovering in 2022.

Also, we will try to give general advice to buyers and sellers in today’s market, as well as provide a list of the top 10 cities with a healthy inventory in 2022 based on Mashvisor’s data.

The State of the Housing Inventory in Recent Years

Although the housing inventory was generally trending downwards between 2014 and 2019, the housing market wasn’t particularly defined as experiencing a low housing inventory. Between the said years, the US housing inventory was relatively stable.

However, it was near the end of 2019 and the early days of the COVID-19 pandemic that the housing market inventory began to see a drastic decrease. In 2020, the housing inventory shortage was severe, with the market struggling to recover ever since.

But how exactly did the global pandemic affect the housing inventory chart to such an extent? There are a few factors that all contributed to the current state of the US housing inventory:

Historically Low Interest Rates on Mortgages

One of the main factors that contributed to the current state of the real estate market, which many describe as a real estate bubble, is due to the reduced interest rates on mortgages.

As part of the government’s relief plan, it cut interest rates on mortgages significantly, which increased the number of people who qualified for a mortgage and made buying a home more accessible.

Increased Demand for Second Homes

While the decreased interest rates resulted in a significant increase in demand for new homes and an influx of new buyers, it wasn’t the only reason for the increased demand.

With the COVID-19 regulations, social distancing, remote work, and the shutting down of most businesses, there was a drastic increase in the number of people who wanted to move out of cities.

City dwellers were more encouraged than ever to buy a second home in the suburbs and move there until things return to normal. It, coupled with the low-interest rates and the more affordable rural markets, led to a massive jump in demand.

Related: Second Home Demand Rises 77% Above Pre-Pandemic Levels

No New House Constructions

While the above two factors could’ve been great for the growth of rural markets and the US housing market in general, the biggest problem was the low housing inventory.

During the pandemic, imports faced severe limitations, significantly affecting construction materials. It led to real estate developers not having access to the materials needed to construct new homes to meet the new demand.

Developers who were still able to construct new homes were forced to sell these homes at higher housing market prices due to the increased cost of imported materials. It meant that the new and sudden increase in demand was only met with a down-trending housing inventory chart.

Housing Market Prices

As a result, by the end of 2021, the housing market prices in most areas in the US were significantly higher. Naturally, when demand increases and supply decreases, prices go up.

However, when all of these factors take place suddenly and at the same time and a real estate bubble seems to be forming, everyone starts to fear a housing market crash. Such an increase in prices was historically high, even reaching double-digit percentages in several markets.

By the end of 2021, the question on everyone’s mind was whether the US housing prices would drop in 2022.

So, is that what we’re going to see in 2022? Or can the housing market inventory recover before a housing market crash can happen?

The State of the Housing Inventory in 2022

In 2022, the increase in housing market prices is slowing down, but it is not stopping. However, experts say that a real estate bubble will unlikely occur within the next couple of years.

The price increase is slowing down mainly due to mortgage rates going back up, which means fewer people qualify for a mortgage.

Additionally, several markets are becoming too expensive for most buyers. Nowadays, residential area single-family homes cost as much as luxury homes were worth just three years ago.

As for the housing inventory 2022, it is still a very low housing inventory compared to four years ago, and it is even slightly lower than last year. It means the housing inventory shortage hasn’t recovered and isn’t expected to recover this year.

With all that in mind, how should investors navigate the house market in 2022?

Related: Mortgage Rates Watch: May 2022 vs. Previous Year

Tips for Real Estate Investors

Real estate investors in today’s market will find themselves at a disadvantage when they want to buy a house, with the increased mortgage interest rates taking many investors out of the market.

But now, all real estate investors are buyers. Homeowners and investors who bought the property before 2020 are the biggest winners in today’s housing market.

With the substantial rise in house prices, homeowners in most markets are able to sell their homes at significantly higher prices than just a few years ago, and they can do so more easily.

Buyers, on the other hand, need to be smarter than ever when it comes to picking a location for investing, and they should expect to spend more money to start investing.

Homeowners

Real estate investors who followed our advice in 2020 and bought investment properties before the price increase are the biggest winners. However, with the increase in housing market prices across the US, all homeowners are benefiting from it by their properties being worth more today than they did a few years ago.

However, the biggest advantage goes to investors who own multiple properties, as well as homeowners in rural markets that saw a significant increase in demand in the past two years. Since the rural markets used to be the cheapest, they saw the highest increase in demand post-2020. Thus, they saw the largest percentage increase in terms of their value.

But eventually, and according to most housing market forecasts, prices will come down again. When it happens, homeowners need to be prepared and sell while the prices are still profitable.

Housing Inventory - Homeowners

Homeowners who purchased their property in the past few years are the biggest winners amid the continuing shortage in housing inventory.

Buyers

Investors looking to buy properties in today’s market must do so with caution. Today’s market is characterized by scarcity, fierce competition, and uncertain returns.

Since most markets face a low housing inventory, buyers who want to enter these markets can expect severely high prices, and they will be competing with the most vicious investors in such markets.

However, a smart buyer will look for opportunities in untapped markets across the US. While many rural and suburban areas were affected by the wave of second-home buyers in recent years, there are still plenty of markets that remain virtually unaffected.

As a buyer, you want to look for markets with a healthy housing inventory, where houses aren’t selling extremely fast, and where prices have not yet skyrocketed.

To help real estate investors who are interested in buying property in such markets, we’ve created a list of 10 cities with a healthy housing inventory that we believe would make great markets for investing.

Top 10 Cities With a Healthy Housing Inventory in 2022

The following are cities with a healthy housing inventory as of June 2022. The list is based on Mashvisor’s data, using the criteria below:

  • Cities with (500 -1,000) listings for sale
  • Median property price below $500,000
  • Properties spend more than 30 days on the market
  • Traditional rental properties with an average cap rate of 2% or above

Based on the above criteria, the following cities demonstrate a healthy housing inventory, are not fiercely competitive, are affordable, and are promising for investment.

1. Oklahoma City, OK

  • Number of Listings for Sale: 911
  • Median Property Price: $333,794
  • Average Price per Square Foot: $163
  • Days on Market: 54
  • Monthly Traditional Rental Income: $1,450
  • Traditional Cash on Cash Return: 3.40%
  • Traditional Cap Rate: 3.53%
  • Price to Rent Ratio: 19
  • Monthly Airbnb Rental Income: $2,242
  • Airbnb Cash on Cash Return: 4.38%
  • Airbnb Cap Rate: 4.56%
  • Airbnb Daily Rate: $99
  • Airbnb Occupancy Rate: 58%
  • Walk Score: 72

 2. Louisville, KY

  • Number of Listings for Sale: 851
  • Median Property Price: $362,509
  • Average Price per Square Foot: $189
  • Days on Market: 52
  • Monthly Traditional Rental Income: $1,288
  • Traditional Cash on Cash Return: 2.32%
  • Traditional Cap Rate: 2.41%
  • Price to Rent Ratio: 23
  • Monthly Airbnb Rental Income: $2,983
  • Airbnb Cash on Cash Return: 5.47%
  • Airbnb Cap Rate: 5.66%
  • Airbnb Daily Rate: $179
  • Airbnb Occupancy Rate: 57
  • Walk Score: 48

3. Tallahassee, FL

  • Number of Listings for Sale: 844
  • Median Property Price: $293,290
  • Average Price per Square Foot: $178
  • Days on Market: 68
  • Monthly Traditional Rental Income: $1,299
  • Traditional Cash on Cash Return: 2.86%
  • Traditional Cap Rate: 2.99%
  • Price to Rent Ratio: 19
  • Monthly Airbnb Rental Income: $2,335
  • Airbnb Cash on Cash Return: 4.77%
  • Airbnb Cap Rate: 4.97%
  • Airbnb Daily Rate: $152
  • Airbnb Occupancy Rate: 49%
  • Walk Score: 30

4. Ocala, FL

  • Number of Listings for Sale: 747
  • Median Property Price: $375,944
  • Average Price per Square Foot: $195
  • Days on Market: 55
  • Monthly Traditional Rental Income: $1,491
  • Traditional Cash on Cash Return: 2.84%
  • Traditional Cap Rate: 2.93%
  • Price to Rent Ratio: 21
  • Monthly Airbnb Rental Income: $3,207
  • Airbnb Cash on Cash Return: 6.04%
  • Airbnb Cap Rate: 6.22%
  • Airbnb Daily Rate: $136
  • Airbnb Occupancy Rate: 65
  • Walk Score: 62

5. Minneapolis, MN

  • Number of Listings for Sale: 715
  • Median Property Price: $390,573
  • Average Price per Square Foot: $267
  • Days on Market: 56
  • Monthly Traditional Rental Income: $1,907
  • Traditional Cash on Cash Return: 2.29%
  • Traditional Cap Rate: 2.37%
  • Price to Rent Ratio: 17
  • Monthly Airbnb Rental Income: $2,879
  • Airbnb Cash on Cash Return: 3.42%
  • Airbnb Cap Rate: 3.53%
  • Airbnb Daily Rate: $127
  • Airbnb Occupancy Rate: 68%
  • Walk Score: 62

6. Fort Wayne, IN

  • Number of Listings for Sale: 645
  • Median Property Price: $239,475
  • Average Price per Square Foot: $124
  • Days on Market: 43
  • Monthly Traditional Rental Income: $1,102
  • Traditional Cash on Cash Return: 3.30%
  • Traditional Cap Rate: 3.47%
  • Price to Rent Ratio: 18
  • Monthly Airbnb Rental Income: $2,394
  • Airbnb Cash on Cash Return: 6.86%
  • Airbnb Cap Rate: 7.16%
  • Airbnb Daily Rate: $94
  • Airbnb Occupancy Rate: 66%
  • Walk Score: 34

7. Tulsa, OK

  • Number of Listings for Sale: 636
  • Median Property Price: $363,917
  • Average Price per Square Foot: $1,589
  • Days on Market: 42
  • Monthly Traditional Rental Income: $1,286
  • Traditional Cash on Cash Return: 2.76%
  • Traditional Cap Rate: 2.88%
  • Price to Rent Ratio: 24
  • Monthly Airbnb Rental Income: $2,319
  • Airbnb Cash on Cash Return: 4.31%
  • Airbnb Cap Rate: 4.48%
  • Airbnb Daily Rate: $116
  • Airbnb Occupancy Rate: 59
  • Walk Score: 37

8. Amarillo, TX

  • Number of Listings for Sale: 606
  • Median Property Price: $330,337
  • Average Price per Square Foot: $151
  • Days on Market: 74
  • Monthly Traditional Rental Income: $1,463
  • Traditional Cash on Cash Return: 2.84%
  • Traditional Cap Rate: 2.96%
  • Price to Rent Ratio: 19
  • Monthly Airbnb Rental Income: $2,243
  • Airbnb Cash on Cash Return: 3.67%
  • Airbnb Cap Rate: 3.82%
  • Airbnb Daily Rate: $99
  • Airbnb Occupancy Rate: 62
  • Walk Score: 71

9. Kissimmee, FL

  • Number of Listings for Sale: 571
  • Median Property Price: $401,444
  • Average Price per Square Foot: $237
  • Days on Market: 43
  • Monthly Traditional Rental Income: $1,910
  • Traditional Cash on Cash Return: 3.05%
  • Traditional Cap Rate: 3.13%
  • Price to Rent Ratio: 18
  • Monthly Airbnb Rental Income: $2,667
  • Airbnb Cash on Cash Return: 3.43%
  • Airbnb Cap Rate: 3.52%
  • Airbnb Daily Rate: $201
  • Airbnb Occupancy Rate: 57%
  • Walk Score: 65

 Related: Florida Real Estate Market 2022 Outlook

10. Jacksonville, IN

  • Number of Listings for Sale: 507
  • Median Property Price: $269,397
  • Average Price per Square Foot: $142
  • Days on Market: 79
  • Monthly Traditional Rental Income: $1,189
  • Traditional Cash on Cash Return: 2.79%
  • Traditional Cap Rate: 2.89%
  • Price to Rent Ratio: 19
  • Monthly Airbnb Rental Income: $2,227
  • Airbnb Cash on Cash Return: 4.87%
  • Airbnb Cap Rate: 5.05%
  • Airbnb Daily Rate: $107
  • Airbnb Occupancy Rate: 59
  • Walk Score: 50

Bottom Line: Will Housing Inventory Increase in 2022?

The housing market isn’t expected to recover in 2022. Compared to last year, the inventory is slightly lower than it was.

However, as mortgage rates are up again, the demand for houses is slowing down and investors are leaving the markets. It didn’t lead to housing prices going down yet, but prices are slowing down and will continue to do so throughout this year.

In 2022, the state of the housing market prices and mortgage rates mean that it is harder than ever for buyers to find great investment opportunities.

Nowadays, buyers need to find untapped markets where the housing inventory is healthy, and the prices are affordable. This is where Mashvisor provides invaluable data that can help investors find the perfect markets and properties to invest in.

Mashvisor provides a lot of insights and analytics that cover most markets across the US. With the ability to export market data and compare the different markets, buyers can find cities and neighborhoods that they can afford and where they can easily find great investment properties.

The list provided above is just a tiny example of what Mashvisor is capable of when it comes to helping you with analytics and finding the perfect property to buy.

To start using our real estate investment tools today, click here to sign up for a 7-day free trial, followed by 15% off for life on your Mashvisor subscription.




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